FIFTH ANNUAL REPORT
THE ONTARIO ENERGY BOARD
YEAR ENDING DECEMBER 31, I964.
ONTARIO ENERGY BOARD
790 BAY STREET
January 29, I965.
I beg to submit the Annual Report for
I964 of The Ontario Energy Board, and I have the
honour to be, Sir,
A. R. Crozier,
The Honourable J. R. Simonett,
Minister of Energy and Resources Management ,
The regulatory decisions and orders of the Ontario
Energy Board are concerned with matters of greater economic
significance, in terms of dollars and in terms of people
affected, than is generally realized by the public. Moreover,
the Board's concern does not end with the issuance of a decision
or order, but in fact only begins. Since the Board has a
continuous regulatory responsibility, it must continue to
live with the consequences of every decision long after it
has been handed down.
To illustrate the extent of the Board's decisions,
in the four major rate cases decided since September 1, i960,
consumer rates were approved or fixed, involving annual gas
sales revenues exceeding $91 million. The rate bases determined
aggregated just under $270 million. As of September 30, I964,
there were approximately 63^,600 gas customers in Ontario,
Since the inception of the Ontario Energy Board in
i960, many millions of dollars have been expended by Ontario
gas utilities on the construction of pipe lines or distribu-
tion systems, which could only be carried out after hearings
for leave to construct pipe lines, or certificates of public
convenience and necessity. A lesser amount, but still a con-
siderable sum of money has been expended in the development
of underground natural gas storage facilities.
The Board's responsibilities with respect to "the
public interest" consist, fundamentally, of balancing the
several rights of the utility investors with those of the
consumer, and in the case of storage operations, with those
of the landowner.
One of the main functions of the Energy Board is
to fix and approve, after public hearing, the rates and
charges for the sale, transmission, distribution and storage
of gas in the Province. Other functions are the granting of
leave to construct transmission pipe lines, authority to
expropriate pipe line rights-of-way, authorization to store
gas in designated areas, granting approval of the terms and
conditions of by-law franchise agreements, and granting
certificates of public convenience and necessity. In addition,
the Board examines and reports on any matters relating to
energy which may be referred to it by the Lieutenant Governor
in Council or the Minister of Energy and Resources Management .
During the year, the Board heard 23& applications,
and held 56 Board meetings. The Board also devoted its
attention to the writing of reasons for decision;- a report
to the Lieutenant Governor in Council on gas storage matters;
drafting recommendations for amendments to the legislation
and the preparation of rules of procedure and regulations
under the new Act.
The following is a breakdown of the hearings which
have been held during the year:
The Ontario Energy Board Act
Rates (section 17) 16
Abandonment of service (section 21) 1
The Energy Act
Leave to Construct pipe lines (section 11) 6
Expropriations for pipe line rights-of-way 205
Designation of gas storage areas (referred by
Lieutenant-Governor in Council) 1
Unitization or Joining of Interests (referred
by Lieutenant-Governor in Council) 1
Deepening of existing wells in designated gas
storage area (referred by Minister) 1
Permission to drill wells in designated gas
storage areas (referred by Minister) 7
In addition to the above hearings, several days of
sitting were required to complete the 'Northern Ontario Natural
Gas rate case which began late in I962 and the commencement
of the Lakeland Natural Gas rate hearing which is still in
Throughout the year 253 applications were filed as
compared with $7 in the previous year. Of these 23$ were
heard, 15 were withdrawn and 1+ will be heard in I965.
Each year the Board obtains from the transmission
companies in the Province information pertaining to the
footage and diameter of all transmission pipe lines owned
and operated by them in any municipality. This data, which
is used for assessment purposes, is then forwarded to the
respective assessors of approximately eight hundred munici-
NORTHERN ONTARIO - TWIN CITY GAS RATE CA SE
This was a joint application of Northern Ontario
Natural Gas Company Limited, and its subsidiary, Twin City
Gas Company Limited. None of the respondent municipalities
t _ok any part in the hearing, although, from time to time,
counsel for certain municipalities were present, and made
oral representations. As stated in last year's Annual Report,
this was one of the most complex rate cases the Board has yet
encountered, presenting some entirely new regulatory problems.
The record of evidence, covering over 500 pages of transcript,
contains sworn testimony from nine expert witnesses, forty-two
exhibits, and argument by counsel.
Based upon this record, the Board issued its Decision
dated March 2, I964. The Board found that for the I96I test
period, the Applicants earned a return of $2, 18$, 542 upon a
year-end rate base of $35,722,197 which represents an experienced
rate of return of 6.13 per cent.
As noted in the Board's Decision, a review of the
financial information for the subsequent two years, indicates
that the experienced returns for those subsequent periods is
still within acceptable limits, and accordingly, the Board
decided that the rates applied for were just and reasonable.
This Decision and Order, which runs to 2+1 pages, is
in printed form and sets out in detail, the reasons for the
Decision, and how the Board has treated such items as plant
valuation, depreciation, working capital allowances, donations,
income taxes, and other rate base and expense items.
LAKELAND NATURAL GAS LIMITED RATE HEARING
The application by Lakeland for an order approving
or fixing just and reasonable rates for the sale of gas is some-
what unique as it is the first application before this Board
seeking the inclusion of an adjustment clause in certain rate
schedules providing machinery for upward or downward rate adjust-
ments related to variations in the cost of gas to the distributor,
Although all the respondent municipalities were served with
the application and notice of hearing, none of them filed any
answer to the application, or appeared, or was represented at
the hearing, or in any way took part in any of the proceedings.
In this hearing, as in Northern Ontario-Twin City
Gas rate case, there are a number of complex regulatory pro-
blems peculair to relatively new natural gas utilities.
The hearing which commenced in June, I961+ and
reconvened in August was adjourned sine die on August 28th
to permit the company to prepare more information with respect
to plant costs as requested by the Board. As in all major
rate cases there is a complete transcript of the proceedings.
It is expected that the hearing will be reconvened
early in I965 and that the Board's written Reasons for Decision
and order will be available in due course.
GAS STORAGE REPORT
With the growth in the use of partially depleted
gas fields for the storage of natural gas in the Province
and the dissatisfaction of the landowners with payments being
made by storage operators, the Government directed the Board
to investigate and report thereon.
Following meetings with landowners in Ontario and
with several gas storage operators both in Ontario and in
certain states in the U.S.A., and the examination of briefs,
the Board filed its report which the Government released on
August 6, 196^. The principles in the report are intended
to serve as a guide to both landowners and storage operators
in any negotiations or renegotiations of annual storage
Part 1 of the report outlines certain principles
to be considered in arriving at the compensation to be paid
for storage rights and a method of calculating the annual
storage payments. Part 2 of the report sets out certain
recommendations regarding the form and content of oil and
gas lease agreements and gas storage agreements. It is to
be hoped that the report will lead to the introduction and
use of a new form of lease agreement .
DESIGNATION OF GAS STORAGE AREAS
An application by The Consumers' Gas Company for a
regulation to designate a gas storage area was referred to
the Board by the Lieutenant-Governor in Council.
The area in question covers approximately 17&2 acres
and is located in Humberstone Township and is known as the
Following a public hearing, the Board in its report
to the Lieutenant-Governor in Council recommended that a regu-
lation be passed designating the area as a gas storage area.
A regulation was duly made, thus providing a potential
storage capacity of approximately 750 million cubic feet for
the use of Provincial Gas Company Limited a wholly owned sub-
sidiary of The Consumers' Gas Company.
CONSTRUCTION OF PIPE LINES
Orders granting leave to construct l6o miles of
transmission lines were made during the year. Four of the
Orders were for replacement of old lines. Permission was
granted to Tecumseh Gas Storage Limited to construct a 30-inch
high pressure line to link the Tecumseh storage facilities in
Moore Township to the Ontario Natural Gas Storage and Pipe-
lines Limited transmission system. This line was built at
an estimated cost of $1.5 million and will have a capacity
of approximately 1 billion cubic feet of gas per day.
By far, the major pipe line project was the construc-
tion of the first section of a 12+2-mile 34-inch line undertaken
and completed by Ontario Natural Gas Storage from its compressor
station in Dawn Township, to the City of London branch line,
a distance of 56 miles. Following three days of hearing,
the Board granted permission for construction of the entire
line which will be built in four stages at a total estimated
cost of $22+. 5 million. There is provision that construction
of the fourth stage from Hamilton to Oakville cannot be
commenced without further approval of the Board. This 32+-inch
line, which parallels a 26-inch line built in 1957, is
essential to meet increased demands during winter peak periods
and will carry gas for Ontario Natural Gas Storage and other
Ontario utilities to and from storage facilities in Lambton
The Board held hearings in the City of London for
the expropriation of 205 parcels of land along the route of
the 32+" pipe line constructed by Ontario Natural Gas Storage
and Pipelines Limited. Expropriation was necessary due to
the failure of the applicant company and certain landowners
to successfully negotiate an easement agreement.
It should be pointed out, however, that in pipe
line expropriations the Board does not settle matters of
compensation, which are referred to a Board of Arbitration
appointed by the Minister under the Energy Act.
In connection with the construction of the 3V
pipe line the Government appointed an inspector specifically
to ensure compliance with the terms and conditions outlined
in the Board orders granting; authority to expropriate and
leave to construct. Working closely with the Board and its
staff the inspector functioned as a valuable intermediary
between the Government, the company and the landowner.
DRILLING IN DESIGNATED GAS STORAGE AREAS
On reference by the Minister of Energy and Resources
Management, the Board heard applications to deepen existing
wells and to drill additional wells in the Dawn #156, Kimball-
Colinville, Payne, Seckerton and Waubuno designated storage
areas in Lambton County. Applications were made for the
deepening of 6 wells and the drilling of 21 new wells within
these areas .
Following public hearings, the Board recommended
that the permits should issue.
JOINING OF ROYALTY INTERESTS
An application by BP Exploration Canada Limited for
a regulation requiring and regulating the joining of various
interests within a spacing unit in the Township of Gosfield
South for the operation of an oil well was referred to the
Board by the Lieutenant-Governor in Council.
BP Exploration, the operator of the well, had been
unable to reach an agreement for the sharing of royalty
interests with the four lessors within the spacing unit.
Following a public hearing in the City of London,
the Board in its report to the Lieutenant-Governor in Council
recommended the establishment by regulation of a new spacing
unit and the joining of the royalty interests therein. The
regulation was subsequently made.
CHAMPION PIPE LI NE I NTERVENTION
On October 15, I964, Champion Pipe Line Corporation
Limited, a wholly-owned subsidiary of Northern Ontario Natural
Gas Company Limited, applied to the National Energy Board in
Ottawa, for a certificate granting it leave to construct and
operate an 8-inch gas pipe line from Earlton, Ontario to a
point in or near Rouyn, Quebec. The proposed pipe line would
transport gas belonging to Northern Ontario Natural Gas to
another wholly-owned subsidiary, Le Gaz Provincial du Nord de
Quebec Ltee for resale to the consumers of Le Gaz.
A copy of this application together with certain
supporting information, was served upon the Ontario Energy
Board and the Attorney-General. The Attorney-General for
Ontario intervened in opposition to the proposed arrangements
under which this line would be operated. The Board and its
staff assisted counsel for the Attorney-General in the pre-
paration of the submission and Board staff were present at
The National Energy Board set the application down
for hearing at Rouyn, Quebec on December 15, 16 and 17.
Representations were made by the Attorney-General for Ontario,
the Attorney-General for Quebec, Trans-Canada Pipe Lines
Limited, and of course, the Applicant.
Following the presentation of all evidence and
examination of witnesses, the National Energy Board closed
the hearing on December 17, and was pleased to reserve its
decision, which is still pending.
At the I964 Session of the Legislature, the Board
recommended that The Ontario Energy Board Act be revised and
up-dated in the light of experience in order to improve its
administration. As a result, The Ontario Energy Board Act,
I964, introduced as Bill i+7, received Royal Assent.
Basic revisions in the new Act were the addition of
an interpretation section, thus making the Act self-contained;-
clarification of the Board's powers (sections 13, 15, 19 and
23); certain strengthening of the gas storage provisions
(sections 20 and 22); the transfer from The Energy Act to Part
II of the Act, of all sections pertaining to leave to construct
pipe lines and authority to expropriate land therefor; amend-
ment to the section dealing with an appeal to the Lieutenant-
Governor in Council from Orders and decisions of the Board
(section 33 ) •
The new Act has been proclaimed in force as of
January 1, I965. Accordingly, new regulations were made and
these became effective simultaneously with the new Act.
CONFERENCE OF CANADIAN PUBLIC UTILITIES COMMISSIONERS
On October 1 and 2, representatives of nine Provinces
met in Toronto to discuss utility regulatory matters of common
interest. This conference was the second held in Ontario, and
was presided over by Mr . A. R. Crozier, Chairman of the Ontario
Technical papers were presented by delegates from
the public utilities boards of other Provinces on regulatory
treatment of income taxes and consumer rates. Full discussion
took place of these and other related problems .
It v/as unanimously agreed by all Provinces that the
exchange of ideas and viewpoints at these Conferences produces
results which justify the holding of future informal meetings .
The I965 Conference will be held in the Province of Newfoundland.
It is not proposed, at this time, however, to organize a Canadian
counterpart of the National Association of Railroad and Utilities
Commissioners, although some occasional contact with that American
body may be helpful to the Provinces.
There has been no change in the membership of the
Board and it has continued to operate with a full-time Chair*
man and three part-time Members.
The staff of the Board has been strengthened by the
appointment of Mr. Ian C. MacNabb, P. Eng., as Board Engineer.
He has had 11 years' experience in the natural gas industry
with a major utility company.